Jobless Spells Research Articles

Sick and tell: A field experiment analyzing the effects of an illness-related employment gap on the callback rate

Abstract Using a randomized audit study design, we find that the job callback rate for applicants with a long, illness-related employment gap caused by cancer is lower than that of the newly unemployed but significantly higher than those whose employment gap is unexplained. Our results suggest that a credible explanation of an employment gap can substantially reduce its scarring effect and that workers with a previous illness do not face a uniquely large rehiring penalty. While previous research shows that jobless spells reduce employment prospects, our results and model provide new insight into the signalling process underlying those findings.

Is the increasing rate of unemployment a worst nightmare facing South Africa?

Unemployment remains one of the major economic and social challenges facing both developed and developing countries. To date, it still remain a policy concern particularly in developing countries where lot of people go through long spells of joblessness, considerable loss of individual income and severe cut in standard of living. In South Africa, Unemployment has been unquestionably high particularly among the youth. This follows the publicized Stats SA quarterly labour survey of 2019 that revealed a 1.8 percentage points increase from 27.2% in the second quarter of 2018 to 29 per cent in the second quarter of 2019. Therefore, the primary motivation of this current study was to analyse the effects of increasing unemployment is South Africa with the aim of recommending possible solutions to the problem. The study employed annual time series data spanning the period 1989 to 2019. The results of the study revealed that GDP per capita, gross national income growth and literacy levels are negatively related with unemployment. This implied that increase in these variables would assist with unemployment reduction in South Africa.

The scarring effects of youth joblessness in Sri Lanka

AbstractRetrospective data on labor market spells for successive cohorts of youth in the school‐to‐work transition in Sri Lanka are used to examine whether early spells of joblessness lead to subsequent difficulty in finding or keeping a job. A balancing score approach is used to generate pairs of youth in the school‐to‐work transition who have similar expected levels of joblessness but who differ in realized levels of joblessness. Assuming that youth are not able to perfectly control whether they are employed or not employed, we argue that marginal differences in joblessness among otherwise observationally equivalent youth can be viewed similarly to a regression discontinuity in experienced joblessness. We find evidence of scarring in that spending the first year after leaving school without a job or training increases subsequent share of time spent jobless by 23–31 percentage points and lowers subsequent wages by 5.5%–7.5%.

Persistent joblessness and fertility intentions

Background: The vast majority of demographic studies have approached and operationalised the notion of economic uncertainty using snapshot indicators. Hence, the complexity and diversity of individuals’ employment careers were largely hidden. We posit that the persistence of joblessness – that is, repeated and close spells of joblessness – represents a crucial marker of economic uncertainty in the realm of fertility (intention) research. Objective: We aim to explore the association between persistent joblessness of both members of the couple and women’s fertility intentions among those who entered employment at least once in the last five years. Methods: We develop an index of persistent joblessness that simultaneously considers individual and contextual labour market conditions. It accounts for the severity of the experience of joblessness, the chances that an individual will escape joblessness, the alleviating effects of the years spent in continuous employment, and the recentness of any joblessness experience. This index is operationalized for Italy by consulting the 2009 Family and Social Subjects Survey. We verify the association between the index and women’s fertility intentions among Italian couples, net of a series of confounders. Results: Our findings show that the higher the level of persistent joblessness, the lower a woman’s fertility intentions. Within couples, we found a gendered association between joblessness and fertility intentions: His joblessness, more than hers, seems to play the decisive role in inhibiting a woman’s fertility intentions. Contribution: We corroborated that joblessness inhibits positive fertility intentions and facilitates negative fertility intentions. But we also added that these associations are much more pronounced when joblessness has been persistent. Disregarding the role of persistence in joblessness, scholars might underestimate the importance of individual-risk factors linked to labour market biographies in fertility planning. We additionally illustrated that accounting for regional labour market dynamics, thus placing one’s own level of persistence in joblessness in context, is pivotal.

Unemployment insurance in a three-state model of the labor market

The paper extends the model of Krusell et al. (2010) to study the welfare effects of unemployment insurance. The model unemployment insurance program includes four realistic features: 1) a 50% replacement rate up to a benefit cap; 2) finite duration of eligibility during a jobless spell; 3) limited eligibility; and 4) and an imperfectly monitored job search requirement. The model is parameterized to fit the size of scope of unemployment insurance in the United States. Removing unemployment insurance from the model leads to only a 0.1% consumption equivalent increase in average welfare. Simplifying assumptions about the structure of unemployment insurance, such as allowing all job losers to receive benefits, lead to much larger welfare effects similar to the effects found in the past literature. Understanding the welfare effects of unemployment insurance requires careful modeling of the structure of the program.

Treatment Effects With Censoring and Endogeneity

This article develops a nonparametric approach to identification and estimation of treatment effects on censored outcomes when treatment may be endogenous and have arbitrarily heterogenous effects. Identification is based on an instrumental variable that satisfies the exclusion and monotonicity conditions standard in the local average treatment effects framework. The article proposes a censored quantile treatment effects estimator, derives its asymptotic distribution, and illustrates its performance using Monte Carlo simulations. Even in the exogenous case, the estimator performs better in finite samples than existing censored quantile regression estimators, and performs nearly as well as maximum likelihood estimators in cases where their distributional assumptions hold. An empirical application to a subsidized job training program finds that participation significantly and dramatically reduced the duration of jobless spells, especially at the right tail of the distribution.

Labour Market Insecurity and Second Job-Holding in Europe

The recent labour market trends reveal an increase of job insecurity across Europe, with more short-term jobs currently available in the labour market, and lengthier spells of joblessness. The need on behalf of individuals to seek for alternative ways of ensuring employment security and a continuous income stream becomes paramount. This paper explores whether second job-holding can be viewed as a hedging strategy against income and employment uncertainty. The results, using the EU-LFS, provide supporting evidence, suggesting that both the incidence and intensity of dual job-holding increases as labour markets become more volatile and precarious jobs more prevalent.

Front-Loading the Payment of Unemployment Benefits

We study the effects of front-loading the payment of unemployment benefits in an equilibrium matching framework with precautionary savings. Front-loading the benefit system trades off fewer means to smooth consumption at long unemployment durations for improved insurance upon job loss. In the United States where jobless spells are typically frequent but short, we find that front-loading the benefit system yields significant welfare gains for new benefit recipients. The gains are lower in the aggregate, but are not completely offset by general equilibrium effects. Comparison with a search effort model shows that the welfare figures are not specific to matching frictions.

Treatment Effects with Censoring and Endogeneity

This paper develops a nonparametric approach to identification and estimation of treatment effects in a setting where observed outcomes are censored and treatment status may be endogenous and have arbitrarily heterogeneous effects. Identification is based on an instrumental variable that satisfies the exclusion and monotonicity conditions standard in the local average treatment effects framework. The paper also proposes a censored quantile treatment effects estimator, derives its asymptotic distribution, and illustrates its performance using Monte Carlo simulations. An empirical application to a subsidized job training program finds that participation significantly and dramatically reduced the duration of jobless spells, especially at the right tail of the distribution.

Recall and Unemployment

We document in the Survey of Income and Program Participation covering the period 1990–2013 that a surprisingly large share of workers return to their previous employer after a jobless spell, and experience very different unemployment and employment outcomes than job switchers. The probability of recall is much less procyclical and volatile than the probability of finding a new employer. We add to a quantitative, and otherwise canonical, search-and-matching model of the labor market a recall option, which can be activated freely following aggregate and job-specific productivity shocks. Recall and search effort significantly amplify the cyclical volatility of new job-finding and separation probabilities. (JEL E24, E32, J63, J64)

Recall and Unemployment

Using data from the Survey of Income and Program Participation (SIPP) covering 1990-2011, we document that a surprisingly large number of workers return to their previous employer after a jobless spell and experience more favorable labor market outcomes than job switchers. Over 40% of all workers separating into unemployment regain employment at their previous employer; over a fifth of them are permanently separated workers who did not have any expectation of recall, unlike those on temporary layoff. Recalls are associated with much shorter unemployment duration and better wage changes. Negative duration dependence of unemployment nearly disappears once recalls are excluded. We also find that the probability of finding a new job is more procyclical and volatile than the probability of a recall. Incorporating this fact into an empirical matching function significantly alters its estimated elasticity and the time-series behavior of matching efficiency, especially during the Great Recession. We develop a canonical search-and-matching model with a recall option where new matches are mediated by a matching function, while recalls are free and triggered by both aggregate and job-specific shocks. The recall option is lost when the unemployed worker accepts a new job. A quantitative version of the model captures well our cross-sectional and cyclical facts through selection of recalled matches.

The Effects of the Great Recession on the Retirement Security of Older Workers

The Great Recession had a profound effect on the retirement security of older Americans, and the slow recovery from the downturn will have a lasting impact on their quality of life. The nature of today’s retirement system left older households exposed to the collapse in the equity and housing markets and induced many to plan for a later retirement. More late-career workers experienced job loss than in previous recessions, often with long jobless spells, encouraging a record number of early Social Security retirement claims and disability applications. Going forward, workers who lost a job can expect lower earnings and more instability and, potentially, poorer health. Even households that avoided job loss will have less money available for spending in retirement due to low interest rates and reduced home values. These findings emphasize the importance of Social Security as income insurance and the need for a more robust retirement income system.

Job-to-Job Flows and the Consequences of Job Separations

This paper extends the literature on the earnings losses of displaced workers to provide a more comprehensive picture of the earnings and employment outcomes for workers who separate. First, we compare workers who separate from distressed employers (presumably displaced workers) and those who separate from stable or growing employers. Second, we distinguish between workers who do and do not experience a spell of joblessness. Third, we examine the full distribution of earnings outcomes from separations - not the impact on only the average worker. We find that earnings outcomes depend much less on whether a job separation is associated with a distressed employer than on whether the separator experienced a jobless spell after the separation. Moreover, we find that workers separating from distressed firms are faster to find jobs at new employers than are other separators.

How Import Competition Affects Displaced Workers in the U.S.

Abstract I use the Displaced Worker Survey and bilateral trade data to assess the impact of import competition from low-wage countries on displaced workers' unemployment duration and re-employment wages. While low-wage imports have almost no effect on unemployment duration for workers displaced from an industry with the average length of the quality ladder, I find that a ten percentage point increase in low-wage imports leads to a 5.6 week longer jobless spell duration for workers displaced from an industry with a short quality ladder. Similarly, a ten percentage point increase in low-wage imports leads to a 7.2 percent decline in re-employment wages for workers displaced from an average ladder industry, but it leads to an 11.3 percent decline in re-employment wages for workers displaced from a short ladder industry. I show evidence that greater low-wage imports raise the likelihood of sectoral relocation upon re-employment, leading to loss of sector specific human capital.

Job Displacement from Agriculture

AbstractUnlike manufacturing employers, “small” agricultural employers are generally not required to participate in the Unemployment Insurance system, which leaves many farm workers ineligible for unemployment benefits. Theory implies that displaced workers who are ineligible for benefits experience shorter jobless spells and a lower reemployment wage. With data from the Displaced Workers’ Survey, we show that displaced agricultural workers spend 4.6 fewer weeks unemployed and upon reemployment earn 9% less than displaced manufacturing workers. Not surprisingly, in states where “small” agricultural employers are required to participate in the Unemployment Insurance program, postdisplacement outcomes for agricultural and manufacturing workers are similar.

Do Reservation Wages Really Decline? Some International Evidence on the Determinants of Reservation Wages

Using cross-country data, we investigate the determinants of reservation wages and their course over the jobless spell. Higher unemployment benefits lead to higher reservation wages. Further, again consistent with the basic search model, repeated observations on the same individual provide scant evidence of declining reservation wages.

Do Reservation Wages Really Decline? Some International Evidence on the Determinants of Reservation Wages

Using cross-country data, we investigate the determinants of reservation wages and their course over the jobless spell. Higher unemployment benefits lead to higher reservation wages. Further, again consistent with the basic search model, repeated observations on the same individual provide scant evidence of declining reservation wages.

Do Reservation Wages Really Decline? Some International Evidence on the Determinants of Reservation Wages

Using cross-country data, we investigate the determinants of reservation wages and their course over the jobless spell. Higher unemployment benefits lead to higher reservation wages. Further, again consistent with the basic search model, repeated observations on the same individual provide scant evidence of declining reservation wages.

Barriers to employment among out-of-school youth

This paper examines employment patterns for out-of-school youth who were part of the recent Center for Employment Training replication evaluation, with a specific focus on their association with education level, childbearing, and arrest status. We find that high school dropouts work less than graduates, owing largely to greater employment instability for men and to both instability and longer spells of joblessness for women. Female dropouts fare particularly poorly, especially those with children. For women, we find no negative association between employment or wages and having children at study entry. Finally, men with prior arrests experience longer spells of joblessness than other men, and they earn substantially lower wages. Describing the nature of employment problems for disadvantaged youth and their association with several potentially important factors can inform program design in the ongoing challenge to find what works.

The Spike at Benefit Exhaustion: Leaving the Unemployment System or Starting a New Job?

In this paper, we review the literature on the in unemployment exit rates around benefit exhaustion, and present new evidence based on administrative data for a large sample of job losers in Austria. We find that the way unemployment spells are measured has a large effect on the magnitude of the spike at exhaustion, both in existing studies and in our Austrian data. Spikes are typically much smaller when spell length is defined by the time to next job than when it is defined by the time spent on the unemployment system. In Austria, the exit rate from registered unemployment rises by over 200% at the expiration of benefits, while the hazard rate of re-employment rises by only 20%. The difference between the two measures arises because many individuals leave the unemployment register immediately after their benefits expire without returning to work. The modest spike in re-employment rates implies that most job seekers do not wait until their UI benefits are exhausted to return to work: fewer than 1% of jobless spells have an ending date that is manipulated to coincide with the expiration of UI benefits.